know your money
Investing & Retirement
Your new job means more money, so it's important to manage it right!
Are you fiscally fit? Starting a new job in a new place provides you with both challenges and opportunities. Make sure that you manage your money effectively, whether that means getting a low interest personal loan or student loan refinance, opening a new account, cashing in on credit card rewards, or investing for the future.
We're here to share with you some of the basics of cash management in the United States. And while you're at it, take advantage of some of the best welcome bonuses out there!
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Retirement accounts in the US
Investment accounts & Retirement Saving
When it comes to your financial future, it's important to understand the core types of investment vehicles that are offered within the United States. U.S. retirement savings programs are of the following core types: social security, defined contribution plans, pension plans, and individual retirement accounts (traditional and Roth IRAs). Each of these retirement vehicles can, assuming you qualify for the requirements, provide tax benefits and other benefits that help you to save. Keep in mind that there are penalties for early withdrawals.
Social Security is the government-run and sponsored retirement system. " As a non-citizen employee, you will likely pay a mandatory 6.2% of your pay on the first $128,400 of your 2018 wages into the system while you are working in the U.S." (source). Your ability to collect social security will depend on factors including your immigration status at the time of your retirement, where you live upon retirement, and country of residence.
Employer-sponsored plans (401-k, 403-b, 457): your employer may have an employer-sponsored plan, which can provide a variety of key benefits. In brief, you can deduct up to $19,500 from your taxes (for the year 2021) of your own contributions and growth of the money is not taxed while it is in your account. Depending on your employers' plan, you may need to make certain contributions in order to receive their contribution - some employers do not match your contributions.
IRA (Traditional and Roth): "If you are considered a resident for U.S. tax purposes (have U.S. earned income, have a Social Security number and meet the substantial presence test), you may open a traditional or Roth IRA" (source). Contributions are up to a maximum of $6,000 (for the year 2021).
In a traditional IRA, you can contribute money that has already been taxed . Depending on your income, your contributions may be tax deductible. Once your money is in the account, its growth goes untaxed until it is withdrawn.
In a Roth IRA, contributions are not tax deductible, but they are not taxed when they are withdrawn "without penalties if the funds were in the Roth IRA for 5 years and you've reached age 59 1/2' (source).
When choosing your investment vehicle, keep in mind that "immigrants may not be able to rely on U.S. public retirement plans. Private companies like Magnifina can help immigrants manage their investments" Asher Rogovy, Chief Investment Officer of Magnifina.